Long-term care insurance makes a great birthday gift

RobertKlein

Robert Klein, CPA, PFS, CFP®, RICP®, CLTC, MBA, MST is the founder and president of
Retirement Income Center, a
retirement income planning firm located in Newport Beach, Calif. The firm
specializes in innovative, conservative income management strategies in addition
to offering traditional investment management services designed to help clients
achieve their retirement income planning goals. Bob is also the sole proprietor
of Robert Klein, CPA, which he founded in 1989. In addition, he is the writer
and publisher of Retirement
Income Visions, a weekly blog featuring innovative strategies for creating
and optimizing retirement income, and previously wrote and published Financially
InKlein’d. Bob has been quoted and featured in various publications, including The Wall
Street Journal, Yahoo! Personal Finance, InvestmentNews,
Financial Advisor Magazine, Bankrate.com, AnnuityNews, Wells
Fargo Small Business Roundup Newsletter, Wealth Manager Magazine and Retirement
Income Journal. Bob can be
reached via his website, Retirement Income Center,
LinkedIn and
Twitter: @IncomePlanner.

You may be financially responsible for your parent’s long-term care if they live in one of 30 states with filial support laws.

Looking for something different to give to your mom or dad for their next birthday? How about long-term care insurance?

Don't laugh. If they don't have it already, this will undoubtedly be the most meaningful and memorable gift you give to your parents and you — even if your mom or dad never uses it.

The absence of an extended care plan is a major void in many pre-retiree and retiree's retirement income plans. This is evidenced by the fact that more than 90% of participants in a 2010 Age Wave/Harris Interactive survey sponsored by Genworth hadn't even talked about critical extended-care issues with their spouse/partner, aging parents or adult children. This was the case despite the fact that 55% of respondents reported that their greatest fear regarding an extended care illness or event was being a burden on their family.

The likelihood of needing assisted care is reinforced by the fact that people are living longer and spending up to 25 or more years in retirement. Given the widespread consensus that 70% of Americans over age 65 will need extended care at home, through adult day health care, in an assisted living facility, or in a nursing home, the lack of extended care planning is a disaster waiting to happen for many families.

In addition to age-related frailties reducing or eliminating our ability to perform various activities of daily living such as bathing, dressing, or eating, severe cognitive impairment, including Alzheimer's, is responsible for a large and increasing percentage of extended care events. Long-term care insurance is designed to address the continuing caregiving needs and expense associated with both types of chronic conditions.

The care recipient is least impacted

Uninsured extended care situations often result in a major financial drain on care recipients and their immediate families. It isn't unusual for lifetime savings to be significantly depleted and family expenses to be forcibly reduced. Not to mention the stress experienced by the care recipient as a result of his/her situation.

While the financial and emotional toll an extended-care event exerts on care recipients is well-known, the fact of the matter is that, one way or another, the individual will receive care. Custodial care will be provided in some setting, whether it's in the care recipient's home, a relative's home, a facility, or some combination thereof.

What wasn't widely reported until recently, and is the real reason for having an extended-care plan, is the financial, emotional, and physical impact of an extended care event on primary and secondary nonprofessional caregivers. Genworth's "Beyond Dollars – The True Impact of Long Term Caring" research, which was initially published in 2010, did an excellent job of documenting this.

Some of the key, eye-opening findings of this groundbreaking study regarding primary caregivers included the following:

The average age of primary care givers is 53, with 42% caring for a mother, 14% for a father, and 13% for a spouse.

42% reported that the care recipient resided in their home for a period of three years or more.

The financial impact was widespread, with 83% contributing financially, 63% reporting lost income of an average of 23% of household income, 61% reducing savings by an average of 63%, 57% dipping into their own retirement funds and/or savings, 45% cutting back on their own family expenses, 40% reducing family vacations, and 29% borrowing money, taking out a reverse mortgage and/or selling their home.

57% provided care for more than 16 hours each week and 31% provided care for more than 30 hours each week.

Over a third reported direct negative consequences to their own careers, including 44% working fewer hours, 48% lost a job, changed shifts and/or missed career opportunities, 38% incurred repeated absences from work, and 17% found themselves repeatedly late for work.

The impact on family and relationships included 44% experiencing an increase in stress with their spouse, 27% reported stress with siblings, 23% experienced an increase in stress with their children, 20% reported reduced time with children, and 58% reduced savings for college education.

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